Sean Hollister

Bernheim says market definition is about whether good substitutes exist, ones that can keep a monopolist from charging whatever it wants for a product. Picture a Samsung television: “You could have bought an LG television, you could have bought a Panasonic, those would be good substitutes.”

Are movie theaters a good substitute, though, if your goal is to watch movies? “We have to ask ourselves, is that a close enough substitute that manufacturers are providing enough discipline for the product manufacturers? And in that example it’s a little far fetched.”

He claims that neither consumers nor developers have good substitutes for Google Play when it comes to getting apps. App distribution on iPhones, non-smartphones, or web apps don’t compete, he says.

“The economic principles that speak to this issue concern what happens when you have corporations that do many things and have may points of contact with each other — they have an interdependent relationship,” says Bernheim, pointing out how Samsung has manufactured the Pixel’s processor among other things.

“What we know is in those types of settings, companies tend to mutually forebear to some degree... even if they don’t agree not to compete, they find it in their best interests,” he says.

I expect Google will combat that during cross-examination.

Then, he shows us another slide titled “Samsung Galaxy Store Only Has Five of the Top 20 Apps Worldwide (2020),” which is exactly what it sounds like.

The missing top 20 apps, as of 2020: WhatsApp, Zoom, Facebook, Snapchat, Messenger, Facebook Lite, Telegram, Garena Free Fire, Subway Surfers, Among Us, SnackVideo, Hunter Assassin, Ludo King, Netflix, and My Talking Tom Friends.

(Samsung did have TikTok, Instagram, Likee, Gardenscapes, and Shareit, according to the slide.)

He says it gets worse: “If Google ends up reducing its commission rate in response to your competitive entry, you end up reducing your commission on everything else you sell.”

The “20 cents” part isn’t theoretical. Bernheim says he found Xiaomi, Oppo, Vivo, and OnePlus each get 20 percent from Google. HMD (Nokia) and TCL signed 10 percent revshare deals.

We previously saw Google had planned to offer 16 percent to key Chinese OEMs, but I guess it grew to 20 percent.

Google has said fewer than 25 percent of phones go that way, and that OnePlus strategically decided not to. While those things might be true, it’s interesting to see how many new phones from the big Chinese manufacturers are coming up Google.

(Realme and OnePlus are shown as having roughly 40 percent of new phones activated on the premier tier; of 830 unnamed OEMs, only around 10 percent of new phones are activated on RSA 3.0. The chart excluded Samsung entirely.)

We’re headed to lunch: see you back here in about 30.

Google Play, 100 percent (2.88 billion phones)

Galaxy Store, 39.5 percent

Xiaomi, 10.6 percent

Huawei App Gallery, 6.3 percent (Huawei hit US government blocks)

Vivo App Store, 4.9 percent

Oppo App Market, 2.1 percent

LG SmartWorld, 1.8 percent (LG quit phones in 2021)

ONE Store, 1.6 percent

SHAREit, 0.6 percent

Epic Launcher, 0.6 percent

Amazon Appstore, 0.1 percent

APKPure, 0.002 percent

F-Droid, 0.002 percent

Tencent, 0.0005 percent (0.01 million phones)

APKMirror, 0 percent

“What is correct is when Google enters these licenses, it doesn’t receive a cash payment from the OEMs... the OEMs are receiving something, and they’re doing something for Google,” says Bernheim.

“They agree to put the suite of GMS apps on their smartphones, and that generates billions of dollars of revenue for Google.”

“Is there anything wrong with saying... that’s one big market that competes with Apple?” asks Epic’s lead attorney.

“There would be quite a bit wrong with that,” says Bernheim.

“We’re looking to see whether there are pockets of transactions where sellers can take advantage of buyers,” he says, saying it’s part of a framework antitrust economists use to do competition analysis — and there’s a general consensus you do it that way.

I expect Google’s economist will say there’s no such consensus.

“I’ve concluded that Google has monopoly power in the market of app distribution on Android smartphones,” says Epic’s economics expert Doug Bernheim, adding that Google “engages in anticompetitive conduct” to maintain its monopoly there.

He says he was assigned to:

Now, he’s explaining what concepts as simple as “competition” and “monopoly power” mean. I’ll let you know when we move further — he says he’ll get specific.

But Google gets a chance to ask one last series of questions before Skinner leaves the stand, one that takes us back to the A1 Camera Company. Yes, Google Play is the largest source of revenue, but Android is the largest source of costs, Skinner testifies, and he believes it makes sense to keep those on separate P&Ls.

Skinner is done, and we’re being introduced to Stanford economics professor and former economics chair Doug Bernheim, Epic’s economics expert, who says he has antitrust experience as well.